Adam Smith International, the top aid contractor for the U.K. Department for International Development, has announced that four executives will step down as part of a major package of reforms in response to investigations into misuse of proprietary information and allegations that it fabricated beneficiary testimonials. While the IDC acknowledged that beneficiaries signed off on all testimonials, the committee raised concerns that ASI was too heavily involved in drafting the documents, and the IDC found evidence that ASI pressured beneficiaries with the possibility of lost funding.
Three founding executives — Andrew Kuhn, Amitabh Shrivastava and Peter Young — and the Executive Chairman and Founding Director William Morrison will retire, according to a press release. The company will also transition to becoming “an enterprise focussed on social impact.”
The company will begin investing “a significant percentage of net earnings” in developing countries through a newly established foundation. The model resembles that of the social enterprise Crown Agents, another DFID supplier that invests a portion of its profits in development initiatives through the Crown Agents Foundation, investing the rest back into the social enterprise.
While some in the U.K. aid community welcomed the shifts — which ASI admits are the result of “government scrutiny of the sector and the International Development Committee’s calls for change to the industry and to ASI,” according to a statement — others wondered how ASI will change its organizational culture and adjust to a diminished focus on profits.
ASI’s financial health is also in question as the reforms package includes a “voluntary withdrawal” from all new DFID procurement. A DFID spokesperson confirmed to Devex that all new procurement with ASI has been suspended since the allegations came to light in early December 2016. DFID funding makes up 50-60 percent of all ASI contracts, according to figures provided by the ASI finance team.
A DFID spokesperson told Devex that the agency “welcomes ASI’s temporary withdrawal from DfID procurement, which recognises the seriousness of our concerns about the supplier’s behavior,” she said. “The problems identified by DFID through our own forensic investigation were fundamental and will not be solved with quick fixes.”
ASI began the process of handing over ownership to employees in 2014, and the appointment of a non-executive chairperson and directors means ASI will be entirely employee owned.
In an interview with Devex, outgoing Executive Chairman William Morrison said: “We recognise that we have lessons to learn and that mistakes were made. And we have been working hard and making major changes to the company to address these problems.”
“That said, we think debate and discussion about the role of contractors has largely been silent on the positive impact that we and others have delivered. The result is that the kind of work we do is still often misunderstood, misrepresented or ignored.”
Morrison added that the whole sector “needs to get better at explaining how complex problems can’t be solved with easy fixes.”
“Yes we’ve been bruised by recent events, but we’re determined to change and to establish ourselves as ‘best in class’ in our conduct. We are working with DFID closely on this and trust that what we have learnt and are learning will inform broader changes across the industry as a whole,” he said.
Others in the aid community welcomed ASI’s decision to become a social enterprise, but also acknowledged that real transformation will be hard work.
Ian Shapiro, director of partnerships and growth at Crown Agents, told Devex he “encouraged all suppliers to genuinely put social objectives firmly alongside financial objectives. The Crown Agents social enterprise, foundation-owned model focuses on social impact rather than profit or shareholder value.”
But he said: “Changing from a solely for-profit business to operating as a social enterprise is not something you can do overnight.”
He described the process as “much more than just a change of structure and staff. It’s about putting the right social values at the heart of the organisation and being confident enough to let them drive strategic direction and business decisions including on fees, recruitment and who to work with and for.”
He added: “It’s also about operating as transparently and openly as possible and getting the balance right between paying to attract high performing and professional people, but not paying excessively,” he said, adding that the recent media attention focused on ASI, which focused in large part on excessive pay, damaged the reputation of DFID contractors.
The Daily Mail newspaper has published several pieces criticizing ASI for excessive profits and executive salaries. The publication also broke the news that a former DFID employee-turned ASI employee shared proprietary information about DFID bids with ASI colleagues.
“It has had an impact on charities, multilaterals and other professional bodies that contract with DFID. Professional suppliers will continue to play a really important part in delivering DFID's programme and we have to be open to scrutiny and trusted to make the fullest and most positive impact on the lives of the poorest people in some of the most dangerous places around the world,” Shapiro said.
Another aid practitioner, who asked to remain anonymous to preserve business ties, agreed that the controversy has been problematic for the sector.
“This episode has been disruptive and time-consuming for DFID’s suppliers, no doubt. But it has underscored the central importance of ethical conduct and compliance, and in the long run that’s a good thing,” he said.
“It’s not immediately clear what the shift from a for-profit enterprise to a social enterprise consists of. It shouldn’t just be a matter of nomenclature — they’re both enterprises — so there has to be substance behind it, to do with the fundamental mission of the organization and the behaviour of its people. [But I’m] not saying it’s not doable.”
Another aid practitioner at a for-profit development organization who also asked to remain anonymous to preserve professional ties acknowledged that ASI had become known in the sector for being “highly competitive, possibly to the detriment of the sector as a whole.”
Asked what legacy he and the other outgoing executives hoped to leave behind, Morrison told Devex: “We hope that the legacy of those who are retiring from the company will be a can-do attitude and a commitment to getting stuff done in even the most challenging circumstances.”
“We’re proud to have built up the company from a micro-enterprise of a handful of people to one of the most significant and effective implementers of technical assistance,” he said.
Update, 2 March 2017: This article has been updated to clarify that DFID funding makes up 50-60 percent of all ASI funding.